Tuesday, September 06, 2016

Further Update on the Blacklock’s “Litany of Litigation” - First Trial Set For September 19, 2016

It is been a while since I’ve updated readers on the “litany of litigation” launched by Blacklock’s. What follows is an update of my earlier postings. See here and here.

Blacklock’s is the very  litigious and controversial “subscription based news Corporation that covers politics, bills and regulations, reports and committees, as well as the Federal Court and Public accounts in Canada”, according to the reasons for judgment dated June 27, 2016 of Justice Denis Gascon in a recent Federal Court ruling dismissing an appeal by Blacklock’s of earlier orders staying all but one of the 10 cases launched in that Court against various federal departments and agencies. One action, (the “Finance Action”) which is the most advanced, will proceed with a trial beginning on Monday, September 19, 2016 for five days here in Ottawa. I’m guessing it will be well attended and I hope that the Court schedules it in a large enough room.  The other nine cases will be stayed “until 45 days following the determination of the Finance Action”.

Justice Gascon’s ruling states:
 [8]   Blacklock alleges that the Defendants have unlawfully distributed its articles within their respective departments or agencies and have breached its copyright after having obtained the articles by way of single-use subscriptions or through third-party sources. According to the Defendants, Blacklock employs a pattern of writing misleading or inaccurate articles about an organization with the expectation that these articles would be accessed and shared internally. Blacklock then makes Access to Information Act requests for evidence of distribution, and claims damages through various means, including litigation.

As they say, none of these allegations have been proven in court.

It is certainly not obvious from a practical or costs standpoint why Blacklock’s would have wanted separate trials on 10 cases against the Federal entities. Alternatively, Blacklock’s wanted to:

"allow all actions to proceed until the pre-trial conference, and only then to consider how to manage the trials."

Perhaps Blacklock’s wanted to pursue each case separately in order to send a message to current and potential defendants that it is serious about litigating and that it expects substantial settlements in order to forestall or stop the litigation. However, that is only my speculation.


The damage claims in each case are relatively modest as these things go, “ranging from $10,000 to $55,000 when they are specified”. Justice Gascon noted that:

[11]           In her decisions, Prothonotary Tabib acknowledged that the facts of each case are different as both the alleged copyrighted materials and the specific alleged acts of infringement are distinct to each case. However, she stressed that “commonality and similarities” reside in the defences raised in the ten actions. These common defences are: whether Blacklock owns the copyright in the articles alleged to have been infringed; the novel defence of abuse of copyright; the defence of fair dealing when articles are copied/used for internal government reporting purposes; the proper assessment of damages (whether they be loss of profit apportioned per article or the value of an institutional licence); and the availability of punitive damages. Prothonotary Tabib also noted that the amounts claimed in the actions filed by Blacklock are modest, ranging from $10,000 to $55,000 when they are specified. 
From Blacklock’s standpoint, the cost consequences of losing or even winning these cases could conceivably far exceed the upside of winning, given the way the Federal Courts costs rules can work with strategic and timely settlement offers where only modest amounts of money are recovered or recoverable. The most obvious cautionary tale is that of Catherine Leuthold, who sued the CBC for more than $22 million but recovered only US $19,200 damages and $168.74 by way of disgorgement of profits.  While she technically “won” her lawsuit, she was ordered to pay the CBC some $80,000 in costs, which included double costs pursuant to Rule 420, due to her refusal to accept a timely settlement offer of US $ 37,500. The costs order was upheld on appeal.  Needless to say, I have no knowledge of whatever settlement offers may or may not have been made by any party in the Blacklock’s litigation. Even the trial judge will not know about any such offer(s), if they exist, before he or she delivers judgment and will only know afterwards if double costs pursuant to Rule 420 become an issue to be determined by the Trial Judge pursuant to the Rules.  However, all experienced Federal Court litigators are aware of these costs rules. Presumably, the calculations have been done and the bets have been placed, so to speak.

Moreover, Blacklock’s has already faced some significant costs consequences. It lost at first instance with costs payable to each defendant in ten different actions on its efforts to oppose the Government’s stay motion and proceed with separate trials for all ten federal cases, and lost the appeal of Prothonotary Tabib’s ruling of March 3, 2016 before Justice Gascon as noted above. This has resulted in some fairly harsh costs awards as far as these things go against Blacklock’s to date. See here for Justice Gascon’s costs award from August 16,  of 2006 which calls for costs of $10,500 payable within 30 days of the Order and here’s the Court’s Order dated October 26, 2015 which awarded  costs to  the Government of $4,000.  This Order indicates rather strong language and a very significant costs order as far as these things go. Here’s the Court’s Order dated October 26, 2015:
 The motion was contested, it was contested extensively and it took a lot of time. There was a need for cross-examination. In the course of the argument, I made comments to the effect that the Plaintiff’s argument and choice of the way in which it chose to understand questions or construed questions was obtuse to the point of being obstructive. 
Justice Gascon commented on the decision below from Prothonotary Tabib regarding the stay motion: 
[43] In her Orders, Prothonotary Tabib concluded that it was in the interests of justice to stay the Nine Actions given that 1) the issues raised by the various actions significantly overlapped, 2) a stay would avoid costly duplication of judicial and legal resources, 3) a real risk of contradictory decisions existed, 4) Blacklock would not suffer prejudice, and 5) proceeding with the ten actions would cause prejudice to the Defendants. I am of the view that each of these five considerations fall well within the discretion of Prothonotary Tabib and that none of them reflects a reliance on a wrong legal principle or a misapprehension of the facts in granting the stays of proceedings sought by the Defendants.
  [44] In fact, I am convinced that Prothonotary Tabib was right to take these factors into account in her assessment of the interest of justice at stake in this case and in ensuring the just, most expeditious and least expensive determination of the Nine Actions and the Finance Action.
  [45] First, I agree with the Defendants and Prothonotary Tabib that there is a significant overlap of issues and facts between the Nine Actions and the Finance Action, and that this was a proper consideration to retain. This overlap includes the ownership of copyright by Blacklock, the defences of copyright misuse and fair dealing, as well as the proper assessment of damages and the availability of punitive damages. Blacklock tries to distinguish the Finance Action from the other actions because the distributed articles were obtained from a third party and not through its subscription. However, the Finance Action concerns the same pattern of conduct and core issues as the other actions. In addition, the issue of copyright ownership in the Finance Action relates to the defence of abuse of copyright raised in all actions. Lastly, the assessment of Blacklock’s actual damages and availability of punitive damages is a recurring theme in all actions.
 
[47] Second, Prothonotary Tabib was not clearly wrong in relying on the avoidance of costly duplication of judicial and legal resources in support of her decisions. The Orders considered the judicial resources that would be saved by the stay, such as a multiplicity of pre-trial conferences and likely procedural motions, and several separate trials resulting in weeks of hearings. Prothonotary Tabib further estimated that even a consolidated trial would require at least three weeks and would delay the determination of even the most advanced actions.
  
 [54] I emphasize that there are numerous common legal issues raised by the Defendants in the ten actions. The Defendants rely on the doctrine of abuse of copyright as a basis to justify their assertion that Blacklock’s actions in a given context amount to copyright trolling. While this matter will be ultimately determined on the facts adduced in each specific case as to whether there has been copyright misuse, there are nonetheless common underlying legal issues being raised. Similarly, while the questions relating to damages, the value of Blacklock’s license for its product and the defence of fair dealing are questions where the factual assessment of the evidence will play a role, they raise comparable underlying legal questions that can be determined and that could be narrowed in the Finance Action.
(highlight added) 
Blacklock’s is clearly the underdog in terms of resources. It is apparently a family business up against 10 Federal Government departments or agencies. And, notwithstanding its legal victory in an earlier decision from the Ottawa Small Claims Court in 1395804 Ontario Limited (Blacklock’s Reporter) v Canadian Vintners Association (“CVA”), 2015 CanLII 65885 (ON SCSM), it must frankly be said that it faces an uphill battle in the Federal Court. From what I’ve seen of the pleadings, which are linked to below, the Feds would seem to have a very strong case in many ways, including but not limited to fair dealing. After all, if a government department can’t avail itself of the fair dealing users’ rights provisions in the Copyright Act for the purpose of research into or criticism of what the media are saying about its public policy positions and the law itself, then what is the purpose of s. 29 of the Copyright Act?  Moreover, the Government apparently has a serious case on copyright misuse and abuse. The Government explicitly alleges that “The Plaintiff is a copyright troll”.

Here is the Statement of Claim and Amended Statement of Defence in T-1391-14, the “Finance” action which has emerged as the lead case. Both of these pleadings are surprisingly brief and general in nature. However, both sides have very able counsel – and hopefully the issues with be dealt with fully and on the merits.

Commentary on Small Claims Court decisions is rare, given that they have no precedential status in higher courts. However, in this case there was a lot of commentary. See, for example the views of Canadian law professor Teresa Scassa here and the redoubtable Mike Masnick on the internationally widely read Techdirt website.  See also other legal commentary that seems mostly negative or deeply sceptical about the decision, e.g. here and here,  here and  here, and a good comment from an IP Osgoode student here. I’m only aware of one commentator who thinks that the Small Claims Court got it right – and she is not a copyright lawyer or expert, as far as I know. See here.

The fact that the Small Claims Court ruling was not appealed likely results from pragmatic considerations.  Moreover, the Canadian Vintners Association presumably has more compelling concerns from its viewpoint than copyright law. Whatever the reason, one can’t fault the Vintners from not appealing this Small Claims Court decision. In any case, the decision not to appeal doesn’t really matter anyway because the Small Claims Court decision – while it got a lot of media attention – has no precedential effect in the Federal Court or the Ontario Superior Court.

Interestingly, I am advised that Blacklock’s has launched at least three actions in the Ontario Superior Court. One of them is being defended by David Fewer, not in his capacity as Director of CIPPIC, but rather in his personal capacity. See the Filmore Statement of Claim here and the Statement of Defence here. It is not known where these three matters stand and whether there is any serious possibility of future developments that may conflict with the Federal Court decision(s).

Given the apparently litigation-based strategy of the plaintiff on the one hand and the resources and the apparent concern for public policy on the part of the Government, it seems likely that the outcome of the trial set to begin on September 19, 2016 may very well be appealed by one side or the other. That appeal would be heard by the Federal Court of Appeal, which is normally very receptive to helpful interventions.

I agree with Prof. Teresa Scassa that this is an important case to watch this fall.

HPK


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